Chapter 18
International Channel Perspectives
Objective 1:
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The International Perspective
What drives the need to focus
on international markets?
Slow growth in domestic markets
Fierce foreign competition
Objective 2:
The Complex Environment
Behavioral processes in
international channels
Environment
of
international
channel
management
From an
International
Perspective
Motivating international
channel members
Designing
international
channels
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Objective 3:
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Key Environmental Factors
Economic Factors
Competitive Environment
Sociocultural Environment
Technological Environment
Legal/Political Environment
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Economic Factors
Inflation
Recession
Deflation
Fluctuating
currency rates
Economic
conditions that
appear in the domestic
environment can also
occur in foreign environments,
but the changes can be more dramatic.
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Competitive Environment
Many less-developed
countries do not
have free &
open competition
Different
languages
Different
cultures
Different
currencies
Because competitive
structure in foreign countries
can be quite different
from that in the United States,
channel structure needs to be
able to adapt to a wide variety of circumstances.
Sociocultural Environment
Varying cultural
Varying
values
attitudes
Varying behavior
Varying
norms
perceptions
Because sociocultural
elements can influence all
elements of the marketing
mix, the channel variable is
sensitive because of the often
necessary person-to-person or
organization-to-organization involvement.
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Technological Environment
Some less-developed
countries have
relatively primitive
communications
&
transportation
technology
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In some developed
countries, technology often
matches or surpasses
that of the
United States.
Varying levels of
technological
advancement around the
world require U.S. channel strategy
either to force foreign suppliers to
meet technological demands or to raise the bar
of their own levels of technology.
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Legal/Political Environment
Government
regulations
Political
pressures
Policies
Tariffs
Import
restrictions
Firms seeking to establish
channels in foreign markets
need to investigate the legal
environment of each country
because of the wide array
of complex & burdensome issues.
Quotas
Objective 4:
Behavioral Processes
In order to avoid negative conflict, use
power effectively, & establish good
communications, the channel manager must
understand the behavioral aspects of
channel systems.
• Japan & Bose speakers
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Objective 5:
Phase 1
Phase 2
Phase 3
Phase 4
Designing
International Channels
Recognize that a channel design
decision must be made.
The design will need to reflect whether
the firm’s distribution objectives
specify reaching overseas markets.
The firm must examine carefully the
kinds of tasks that need to be performed
to successfully meet the firm’s
distribution objectives.
Develop a set of channel structure
alternatives for the specific international
environment.
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Objective 6:
Alternative Channel Structures
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Indirect Exporting
Production
in home market
Indirect
export
Casual
exporting
Trading
company
Export
management
company
Cooperative
(piggyback)
Casual Exporting
The firm is just beginning to sell its products
overseas.
Unsolicited orders from foreign countries may
also account for significant parts of this
type of exporting.
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Trading Companies
They are large and have
access to many world markets.
They can provide a U.S.
firm with rapid entry into foreign countries.
But:
Because the trading companies are so large,
U.S. firms have little influence over how their
products are sold.
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Export Management Companies
Domestically based wholesalers or
manufacturers’ representatives who
specialize in overseas sales
They offer an attractive alternative to the firm that seeks
a higher level of involvement in international
marketing than that provided by casual exporting
or trading companies.
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Cooperative or Piggyback
Arrangements
The carrier is the firm already involved
in exporting.
The rider is the firm that
uses the international expertise
and capabilities of the carrier to
enter foreign markets.
This method can offer the rider an opportunity
to gain entry into foreign markets with little
capital outlay, while the carrier can obtain
a desirable product to sell.
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Alternative Channel Structures
Direct Exporting
Production
in home market
Direct
export
Foreign
distributors
Agents
Overseas
marketing
subsidiary
Foreign Distributors
The manufacturer’s ability to exercise control
over how its products are marketed by
distributors is a crucial issue in domestic
and in international marketing.
But:
Modern technology has made it much easier
and more efficient for U.S. manufacturers
to communicate with foreign distributors.
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Foreign Agents
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They are independent, but they do not take title to, and
usually do not take physical possession of,
the products they represent.
They can arrange for the performance of most of the
international marketing tasks.
Overseas Marketing Subsidiary
When the manufacturer establishes its own foreign
sales branch overseas and it can perform most
or all of the international marketing tasks
Requires substantial commitment and investment
in international marketing
But:
Because the subsidiary is owned by
the manufacturer, the degree
of control possible is greater.
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Objective 7:
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Motivating Channel Members
Three facets of motivation management:
1. Finding out the needs & problems of
channel members
2. Offering support to the channel members that is
consistent with their needs & problems
3. Providing leadership through the effective use
of power
Objective 8:
Effective
leadership
occurs under
the following
circumstances
Leading Foreign
Marketing Channels
1. Roles & routines of foreign
distributors were not rigidly set by
overseas manufacturer, but were
adapted by distributor to changing
circumstances in market
2. Marketing strategy decisions were
made jointly by manufacturer &
distributors
3. High degree of personal contact
between manufacturer & foreign
distributors maintained through
personal visits, phone calls, & letters
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